Food Economics

In the last several decades, the economics of the food system have changed dramatically. Millions of farms have folded as government policy has encouraged larger, more intensive farm operations, such as the factory farm 1 model for producing meat, eggs and dairy.

A handful of corporations—producers of seeds, processors of meat and milk, and grocery retailers—now dominate most aspects of the food system, giving them enormous power to control markets and pricing, and enabling them to influence food and agricultural regulations. The largest of these agribusinesses are practically monopolies, controlling what consumers get to eat, what they pay for groceries and what prices farmers receive for their crops and livestock.

Supporters of this new industrial model boast its “efficiencies,” touting its ability to produce huge quantities of cheap food. This analysis, however, fails to take into account the many hidden costs, including declining rural economies and farmer livelihoods, environmental damage and public health consequences. An expert panel, the Pew Commission on Industrialized Farm Animal Production, released a report in 2008 that addressed the “unintended consequences of this type of animal production.” The commission’s report goes on to say that:

While increasing the speed of production, the intensive confinement production system creates a number of problems. These include contributing to the increase in the pool of antibiotic-resistant bacteria 2 because of the overuse of antibiotics 3 ; air quality problems; the contamination of rivers, streams, and coastal waters with concentrated animal waste; animal welfare problems, mainly as a result of the extremely close quarters in which the animals are housed; and significant shifts in the social structure and economy of many farming regions throughout the country. 4

Rural Economies

Among the hidden costs of industrial food production are its effects on small family farms and rural communities, which include the loss of nearly four million farms in the United States since the 1930s. 5

Sustainable farms support local economies by providing jobs for members of the community and purchasing supplies from local businesses. A University of Minnesota study showed that small farms with gross incomes of $100,000 or less made almost 95 percent of farm-related expenditures within their local communities. 6 Studies have shown that small, locally owned farms have a multiplier effect: for every dollar the farm spends, a percentage remains in the local economy, contributing to the economic health of the community. 7

Factory farms hire as few workers as possible and often purchase equipment, supplies, and animal feed from the same agricultural conglomerates that purchase their products. 8 The University of Minnesota found that large farms with gross incomes greater than $900,000 made less than 20 percent of farm related expenditures locally. 6 Industrial farms often have absentee owners whose profits are sent out of town.

The Economic Efficiency Myth

Even when the hidden costs of factory farming are ignored, industrial agriculture is often less efficient at producing food than smaller, sustainable farms 9. While large-scale, single crop (also called monoculture 10 ) farms produce a large output per worker, diversified sustainable farms produce more food per acre of land. 5 In other words, sustainable farms require more workers and create more jobs, while also doing a better job of feeding people on smaller plots of land than industrial farms.

Despite decades of claims to the contrary, industrial farming has not relieved famine or hunger throughout the world. On the contrary, industrial agriculture has fed a culture of over-consumption, particularly in the United States, where large quantities of food are tossed in the trash while, 11 at the same time, the population is in the throes of an obesity epidemic. 12

Meanwhile, a study by the University of Essex found that sustainable agriculture increased productivity by an average of 93 percent on nine million farms in places including the Sahel region of Africa, the hills of the Andes, the rainforests of Southeast Asia, and other areas where synthetic-chemical-dependent farming is neither affordable nor successful. 12 As many Western governments and foundations are attempting to introduce industrial agriculture to Africa, a report by an international affiliate of the United Nations, endorsed by 58 countries and prepared by 400 experts, advocated instead a low-input, small-scale agricultural model. 13 In 2011, the United Nations reported that using low-input organic methods, African farmers could double their production. 14

Subsidies

Vilified in public policy debates, farm subsidies comprise a flawed but vital part of the current government support system for farmers. Farming is unlike most other business because most farmers are highly leveraged—literally banking the farm on a yearly basis to borrow money for operating costs, with the hope that their crop generates a profit. Because of weather, pest infestations, and financial speculation, farming is also a highly volatile business. For these reasons, agriculture relies on the government to provide a safety net.

Commodity subsidies accomplish this, but also, unfortunately, currently have the effect of propping up a system designed to drive overproduction of commodity crops—supplying the cheap corn and soy that drive factory farms and corporate profits.

Simply getting rid of subsidies won’t solve agriculture’s problem because farmers depend critically on a government support system to float them in bad years. A better policy approach would be to set up price floors for farmers, creating a sort of minimum wage, while also establishing a reserve system of commodity crops. This would enable the government to manage supply (and prices) by releasing the reserve onto the market when harvests are bad and buying up surplus crops when the harvests are good. Reducing the volatility in commodity markets would help farmers avoid their natural tendency to plant crops on every inch of their farms, and could reduce the overproduction that lets commodity crop buyers (who turn corn and soybeans into animal feed for factory farms and ingredients for processed food) pay too low a price to farmers.

Market Concentration

Meat production today is marked by intense market concentration in which a very small number of corporate packers accounts for the majority of meat that ends up in your grocery store. In 2007, four corporations slaughtered 83.5 percent of the nation’s beef, 66 percent of the pork and 58.5 percent of the poultry. 15 This enormous market power wielded by a handful of small companies has the effect of dramatically reducing competition in agricultural markets, which also reduces prices paid to farmers. For example, an independent beef producer used to have myriad buyers vying to purchase his or her product, including auction houses; today, increasingly, the beef producer may only have one or two corporate buyers, greatly diminishing his or her ability to get a fair price. 16

Abusive Patents

A growing source of revenue in agriculture is patents. By creating a new animal breed or plant seed or agrochemical and patenting it, a company can control its use—how much it costs and how it can and cannot be used. The vast majority of the corn, cotton, soy and sugarbeets grown in the United States, for example, are produced with genetically modified seeds 17, which are patented and owned by a handful of biotechnology corporations. 1819 In 2007, four companies controlled nearly a third of the global seed market, and two companies controlled 58 percent of the corn seed. 15 For farmers, this means fewer options and higher prices for their major input—seeds.

Though genetically engineered products now dominate commodity crop production in the United States, researchers from the United States Department of Agriculture have called this widespread adoption “puzzling,” given the mixed and even negative economic returns of the product. 20 Widely hyped and poorly regulated, genetically engineered crops are of dubious value to farmers, while endanger their health and livelihoods.

Supply, Demand and Food Prices

Growing corporate power in agriculture has led to steadily rising prices for staples like meat, milk and eggs, while the farmer’s share of the consumer grocery dollar has fallen. 16

As more consumers consider the environmental, health and social consequences of industrial food production, demand for sustainably raised foods is growing. According to the USDA, farmers are dedicating more and more land to organic production 21 in response to consumer demand, with total organic acreage increasing at a rate of 15 percent annually. 22

Farmers' markets, food cooperatives, and community supported agriculture (CSA 23 ) programs continue to grow in popularity, making local, sustainably produced food more available. These programs offer consumers the opportunity to put their dollars directly into farmers' pockets, cutting out cooperate middlemen and strengthening a regional food system.

Did You Know?

The rural workforce employed on US farms dropped by about 50 percent in the 1980s and 1990s. 24

What You Can Do

Increasing sustainable food production results from concerned consumers making informed, responsible choices. By purchasing sustainable foods from your local farmer or grocery store, you support the farmers who are raising food responsibly and actively encourage the growth of a more sustainable food system.

Wherever possible, instead of giving your money to industrial agriculture, give it to a sustainable farmer. Buy foods directly at farmers' markets, farm stands, or through a CSA 23 group. Check out Eat Well Guide to locate sources of sustainable food in your area.

Glossary

Antibiotic Resistance

Antibiotic resistance (or pesticide resistance) refers to the ability of a species, or certain individuals within a species, to survive in the presence of a chemical or other treatment due to adaptati

Antibiotics

Antibiotics are medicines derived by extracting chemical substances produced by molds or bacteria which inhibit the growth of, or kill, microorganisms. These substances are used as cures for bacterial

CSA

CSA is the abbreviation for Community Supported Agriculture, a system in which consumers fund local farms by paying in advance for agricultural products. This model reduces the financial risks for the

Factory Farm (Industrial Farm / Industrial Agriculture)

Factory farms, or industrial farms, are a modern type of agriculture which 1) requires high inputs of money, fertilizers, and labor (or labor-saving technologies such as pesticides, in the case of cro

GMO

Genetically Modified Organisms (GMO) are plants or animals that have been genetically engineered. Many industries support the development and use of GMOs while many consumers and organizations questio

Monoculture

Monoculture is a common practice in modern agriculture in which large acreages of land are planted with one type of crop, usually multiple years in a row. Often such techniques are used to supply good

Organic

The "Organic" label is a federally regulated certification signifying that a product, its producer, and the farmer meet the USDA’s National Organic Program’s production and handling standards and that

Sustainable Agriculture

Under the 1990 Farm Bill, sustainable agriculture means “an integrated system of plant and animal production practices having a site-specific application that will, over the long term: satisfy human f

footnotes

Center for Disease Control. (2009). Recommended community strategies and measurements to prevent obesity on the United States. RMorbidity and Mortality Weekly Report, 58(RR07).